IB9CR-15 Alternative Investments
Introductory description
Over the past decade the investment climate has seen several large swings. We went from a bull market where it was easy to make money, to an environment with volatile stock markets, interest rates at a historical low, and pension fund deficits widespread. With traditional asset classes expected to deliver lower returns in the future compared with the past, many high net worth individuals and institutional investors have turned to alternative investment classes, with hedge funds and private equity amongst the most popular. In this module, we will introduce students to alternative investments, both from the perspective of an investor in alternatives and from the perspective of a hedge fund manager. We will discuss the pros and cons of alternatives, and the role they can play in a diversified investment portfolio.
Module aims
This module will provide students with all the insights needed to make well-informed decisions with regard to today’s complex investment management environment.
The following subjects will be covered but are not conclusive.
An overview of the evolution of the hedge fund industry, the investors, compensation structure and legal structure.
Hedge Funds
Characteristics of hedge funds, leverage, short positions, derivatives. Hedge fund strategies, long/short equity, global macro, statistical arbitrage, relative value. Quantitative and judgmental styles. Liquidity of hedge fund investments, gates and lock-ups, fees and incentives. Style analysis of hedge funds. Hedge fund indices. Funds of Hedge Funds.
Active currency strategies, PPP, the carry trade, momentum. Commodity strategies, backwardation, convenience yield, relative value, sustainability between commodities (e.g. corn and wheat).
Global Macro hedge funds and Macro Economic fundamentals.
Private Equity.
Limited Partnerships, General partners, Limited partners, control mechanisms, control premiums, minority interest discounts, private and public P/E ratios.
Students are requested to prepare selected material ahead of each lecture. They are strongly encouraged to actively engage in class room discussions to get the most out of this course.
Outline syllabus
This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.
Rising from relative obscurity, over the last 15 years hedge funds and private equity have become increasingly popular with high net worth individuals as well as institutional investors. Based on the latest research and practical insights, this module will discuss:
The differences between hedge funds and mutual funds,
The main hedge fund databases and indices,
The most typical hedge fund investment strategies,
The statistical properties of hedge fund returns,
Hedge fund performance so far and its drivers,
The role hedge funds may play in an investment portfolio
Introduction to Private Equity
Learning outcomes
By the end of the module, students should be able to:
- Demonstrate a clear understanding of hedge fund strategies, their behaviour under different macro environments and their statistical properties
- Demonstrate a clear understanding of the basics of Private Equity as an alternative asset class
- Demonstrate a clear understanding of the shortcomings of hedge fund databases
- Demonstrate a clear understanding of the basics of hedge fund replications strategies
- Demonstrate a clear understanding of the pros and cons of investing in alternatives, and the role they can play in a diversified investment portfolio.
- Critically analyse academic papers and understand the covered research on hedge funds and private equity
- Identify the strengths and weaknesses of investing in specific alternative strategies
- Critically analyse the statistical impact of adding hedge funds to the a traditional portfolio consisting of long only assets
- Demonstrate a critical understanding of the assumptions underlying hedge fund databases and their impact/restrictions on empirical studies.
Indicative reading list
Reading lists can be found in Talis
Subject specific skills
Style analysis hedge funds
Transferable skills
Written communication
Oral communication
Study time
| Type | Required |
|---|---|
| Lectures | 9 sessions of 2 hours (24%) |
| Seminars | 9 sessions of 1 hour (12%) |
| Private study | 49 hours (64%) |
| Total | 76 hours |
Private study description
Self study to include preparation for lectures and seminars
Costs
No further costs have been identified for this module.
You do not need to pass all assessment components to pass the module.
Assessment group D2
| Weighting | Study time | Eligible for self-certification | |
|---|---|---|---|
Assessment component |
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| Group Presentation | 25% | 18 hours | No |
Reassessment component is the same |
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Assessment component |
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| 2 hour examination (May) | 75% | 56 hours | No |
Reassessment component is the same |
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Feedback on assessment
Written and oral feedback, in lectures and via my.wbs
There is currently no information about the courses for which this module is core or optional.